• Leveraging Board Involvement in the M&A Process
  • January 5, 2017 | Author: T. Ted Motheral
  • Law Firm: Walter - Cleveland Office
  • It happens over and over again. Companies get close to making an acquisition but then there are all sorts of costly delays and complications because the company’s board of directors is raising concerns or didn’t have the information it needed, when it needed it, to make an informed decision on the transaction. Too often company leadership and members of the board do not have good communications when it comes to effectively consummating a merger or an acquisition.

    Ensuring good communications and expedited decision-making happens long before a deal is brought to the table. Companies that have identified mergers and acquisitions as part of their overall growth initiatives need to develop strategies before the first deal is ever evaluated to make sure goals are aligned and expectations are managed. Otherwise, boards are often forced to make very reactive decisions without having the information they ultimately need. Too much or too little information can delay decisions or even terminate what could have been a very profitable transaction.

    The following are tips to keep in mind to effectively involve your board of directors in the M&A process:
    • Develop written policies for identifying and evaluating potential deals to ensure that management and the board agree on how deals will be sourced, what factors will be weighed, what questions to ask of prospects, and how prospective acquisitions will fit into the overall corporate structure and strategy.
    • Recruit board members with pertinent M&A experience so they can guide the board in asking the right questions and making timely decisions.
    • Develop a list of questions that will be consistently asked when evaluating all prospects relative to projected income streams, potential risks and liabilities, breakdown of responsibilities and liabilities between the parties, and potential issues arising from the integration of the new facility or assets.
    • Create a formal process for learning from previous acquisitions and attempted acquisitions so that mistakes are not repeated.
    • Clearly define responsibilities of management vs. the board during the M&A process. Some boards are too involved, restricting management from doing its job. Others are too removed and only brought into the process shortly before the close of the transaction.
    Board members today have more fiduciary responsibilities and are exposed to the potential for heightened scrutiny in terms of liability. It is in the best personal interests of the board members, as well as the best interests of the company, that boards have the right information at the right time to make the most fiscally responsible decisions.